2 Reasons Pfizer's Stock Beat the Field in 2016
According to data fromS&P Global Market Intelligence, Pfizer's (NYSE: PFE) shares gained 1.66% in 2016. While such a modest gain may not seem impressive at first glance, the drugmaker's shares markedly outperformed the broader field of pharma stocks, shown by the dreadful performance of the iShares Nasdaq Biotechnology ETF last year:
Pfizer's stock was able to edge higher last year -- despite the politically unfavorable environment toward pharma companies at large -- for two reasons.
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Firstly, the drugmaker returned a whopping $10.5 billion to shareholders through share repurchases and dividends during the first nine months of 2016. The $5 billion accelerated portion of the drugmaker's share repurchase program played a key role in driving the company's adjusted diluted EPS higher by 15% during the first three quarters of the year.Pfizer's strong commitment to returning cash to shareholders also kept its dividend near the top of its peer group with a yield topping 3.5% for the bulk of 2016.
Secondly, Pfizer continued to be aggressive on the M&A front in 2016 by buying both Medivation and Anacor Pharmaceuticals. Both of these acquisitions have the potential to add multiple new growth products to the drugmaker's product portfolio over the next few years, helping to offset the negative impact of the company's legacy product portfolio, which is experiencing a significant decline in earnings power at the moment.
The $80 billion question facing Pfizer and its shareholders this year is whether Trump can indeed push through his plan to reduce corporate tax rates to a flat 15% and offer companies a viable path to repatriate foreign profits. If Pfizer is able to bring back even a portion of its $80-plus billion in overseas profits, the drugmaker's shareholders could be in for a banner year in 2017.
If not, this top pharma stock still offers one of the most robust clinical pipelines in the industry, a strong balance sheet, modest near-term growth prospects, and a better than average dividend yield for a major drug manufacturer. Pfizer appears primed to continue its winning ways in 2017.
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George Budwell owns shares of iShares NASDAQ Biotechnology Index and Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.